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AHDB Pig Market Weekly

23 May 2016

AHDB Pig Market Weekly - 23 May 2016AHDB Pig Market Weekly - 23 May 2016


Producer share of retail price still low

Although it increased slightly in April, producers’ share of the retail pork price remains historically low, at 31%. This is one point higher than in February and March but these were the lowest figures for over a decade and the April level is still four points down on April 2015. While the farmgate price rose slightly between March and April, retail prices fell slightly overall, reaching their lowest level since mid-2012. Nevertheless, the price received by producers was 14% lower than a year before, while retail prices had only fallen by 3%.

The fall in retail prices in April was largely due to lower prices for boneless leg (-2%), loin chops (-3%) and diced pork (-5%). Other cuts experienced only small movements, with some cheaper and others more expensive. Over the longer term, there were mixed trends in prices compared with April 2015. The biggest price falls were for diced pork (-7%), loin chops (-5%), minced pork and boneless shoulder (both -3%). However these were partly offset by price rises for pork fillet (+5%) and fillet end leg (+4%).

UK exports show strong growth in March

UK exports of fresh/frozen pork grew significantly once again in March, to 19.4 thousand tonnes. This was a 22% increase on the same period a year earlier and compounded the strong start exports have recorded this year to date. Shipments to China were the predominant cause of this growth, up 72% on a year earlier. Increased sow slaughterings in the UK contributed towards the growth in shipments to Germany (+15%). Although much smaller in absolute volumes, shipments to the United States more than doubled and Philippine shipments were four times greater than the same period a year earlier.

The value of exports also grew in March, to over £21million, which was a 37% increase on a year earlier. This was assisted by the high pig price in China as well as increased volumes of pork exported to high value markets.

Offal exports more than doubled in March, with large increases recorded in shipments to the Asian markets. Chinese exports rose to 3.3 thousand tonnes, while shipments to Hong Kong nearly trebled and levels to the Philippines and South Korea experienced a four-fold increase, albeit from a smaller base. There were also higher exports to some EU countries but these are likely to be for onward movement to Asian markets. Sausage and processed exports fell during March from 2015 levels, although volumes were relatively small.
Imports of pork were also down by 3% over the same period a year earlier. The weakening pound has helped to dampen import volumes. Unit prices remained low, however, with the value of imports down by 13% at £45.9 million. Imports of other pig meat products were also lower.

UK pig prices

The GB pig price continued to recover in week ending 14 May, with the EU-spec SPP up 0.9p on the week, to 115.60p/kg. This is the sixth consecutive week the price has increased and the SPP is now 3.5p greater than its lowest point, recorded in March. Strengthening EU prices and strong demand from China have both helped to support the UK price in its upwards trend.

Estimated slaughterings continued to rise and were up 3% on a week earlier and 4% on a year earlier, at 174,000 head. However, some processors had a shorter kill week the week before, due to the Bank Holiday. Average carcase weights continued to slide slightly, down 0.16kg to 82.61kg on the week. Nevertheless, they are still almost a kilo heavier than this time last year.

The EU-spec APP also increased in the week ending 7 May, up 0.45p to 117.71p/kg. The gap between the APP and SPP has contracted further from the week earlier to just over 3p, which is almost 1.5p less than the same period last year and the smallest gap since January 2015.

The fluctuations in the weaner markets continued, with 30kg weaners recording a price fall of £1.70 to £36.96 and 7kg weaners realising a price increase of a modest £0.32 to £29.33 in week ending 14 May. This may infer that there is increasing confidence in the longer-term market, while there are still levels of uncertainty for shorter-term finishers.

Pork a winner at Easter

This year, total red meat sales in the four weeks running up to Easter were worth £310m – down 4% year-on-year, according to analysis by Kantar Worldpanel. The proteins that performed well over the Easter period were fish, pork and chicken, while beef sales were similar to last year. In contrast, 12% less lamb was sold than in the four weeks before Easter last year. Promotional sales were down for most proteins but more pork was sold on promotion. The wider trend within the major multiples continues to move away from volume-driving Y for £X deals towards Temporary Price Reductions (TPR) deals and everyday low prices.

The roasting joint market, in particular, was in decline this Easter, with volume sales down 4% year on year. Lamb roasting joints were the main contributors to the decline, with beef and pork joints seeing some growth in volume (but not in value). Pork roasting joint successes pushed pork into overall volume growth for the 4 weeks. Shoulder sales drove activity in the first fortnight of the 4-week period before Easter – this could be linked to promotional activity and the latest pulled pork campaign running at that time. In the fortnight immediately before Easter, pork leg joints drove sales, helped by increased price promotions.

Russian pork imports grow

Russian fresh/frozen pork imports grew significantly in Q1 2016 versus the same period a year earlier, up 59% to 50.2 thousand tonnes. Although volumes were still way down on levels prior to the 2014 trading ban, it illustrates that Russia is still utilising foreign product to satiate demand, as the drop in the global price makes it an economically sound proposition. This growth in imports has largely been driven by increasing shipments from Brazil, which were up 86% on Q1 2015. This growth was helped by the embargo against Ukrainian pork in place since January. With the devaluation of the real, Brazilian pork has become increasingly price competitive, especially at a time when the rouble is showing a lot of market instability. The average unit price of Brazilian pork was over ?50 (24%) cheaper than the same period a year earlier.

Russian export levels have started to ramp up; although volumes are still relatively low, they were almost 7 times greater in Q1 2016 than Q1 2015. There has been significant investment in the pig production industry in Russia, with the government heavily subsidising pig production investment projects. This investment aims to grow Russia’s commercial production, with the goal to be self-sufficient by 2020. This could lead to Russia becoming a more significant exporter in the future. However, at the same time, Russian consumption of pork has fallen and, if the current growth rate continues, runs the risk of over-supply. With this in mind, there may be pressure put on the Russian pork price and both this and increasing production may cause the rise in imports to be temporary.

2016 Pork Yearbook – a wealth of information

The 2016 AHDB Pork Yearbook, published last week, contains a wealth of information including details of the AHDB Pork Board’s 5-point plan to help the pig industry during these challenging times. There are also details of AHDB Pork-funded research and field trials and putting knowledge into practice through articles, events, visits and workshops. The Yearbook includes industry statistics looking at performance and trends, with international comparisons and trade statistics. There is a section looking at the effect on the cost of production when making key changes to performance.

Another important section contains performance tables showing the trend over the last ten years for key indicators, such as pigs weaned per sow per year for indoor and outdoor sows. Whilst starting from a relatively similar position in 2000, the indoor sow herd has steadily increased the numbers of pigs weaned per sow per year from 22.1 to 26.0, with the top third achieving 28.4. The outdoor sow herd has fluctuated slightly over time but not improved the number of pigs weaned per sow per year averaging 22.2 in 2000 compared to 22.1 in 2015, with the top third achieving 24.3.

The table details indicate indoor sow improvement has been almost exclusively as a result of increasing the number of pigs born per litter and keeping them alive. Litters per sow per year have remained around 2.26 and pre-weaning mortality has fluctuated around 12%. In the case of outdoor sows, the litters per sow per year has remained around 2.24 and a small rise in pigs born alive has been cancelled by a small increase in pre-weaning mortality.

French exports increase slightly in Q1

According to the latest figures released via French Customs, pork exports from France increased by 5% to 115.4 thousand tonnes in Q1 2016, when compared with the same period a year earlier. This growth was driven by an increase in Chinese shipments, which were up four-fold, to 21.8 thousand tonnes. France, like many other major exporters, has capitalised on the growing Chinese pork demand and increased shipment volumes throughout the first quarter of 2016. Growth in exports to other Asian countries was also recorded, albeit in smaller actual terms, with the exception of South Korea. French shipments to fellow EU member states decreased by 10% in Q1 on a year earlier, with decreasing volumes exported to Italy (-29%) and the United Kingdom (-3%) driving this downturn.

Imports recorded a significant decrease in Q1 2016 versus a year earlier. They were down 19% to just over 75 thousand tonnes. Volumes were down from all the main supplying countries, with Spanish shipments reduced by 17% and German ones down by 45%. This may be partly due to increasing pressure from French farmers, encouraging consumers to buy French produce in preference to imports.

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